Steve Jobs

The United States has significant economic inequality, but it has been part of the American narrative that upward mobility is not only possible but actually the normal order of things. This narrative has many components. One is the idea that each generation will (or should) do better than the previous generation. Another is that individuals can use their talents, gumption and a bit of luck to rise upwards from humble beginnings to great success. This general narrative is typically accompanied by specific anecdotes, such as the popular tales of Steve Jobs, Bill Gates and Mark Zuckerberg.

While narratives and anecdotes can be rather interesting, they are not a proper substitute for adequate evidence. After all, anecdotes might be (and often are) about cases that are unusual or exception rather than what is supported by the weight of statistical evidence. This is why there is a fallacy of anecdotal evidence. This fallacy is committed when a person draws a conclusion about a population based on an anecdote (a story) about one or a very small number of cases. The fallacy is also committed when someone rejects reasonable statistical data supporting a claim in favor of a single example or small number of examples that go against the claim.

42% of the men raised in the bottom 20% income remained there as adults, which matches poorly against Britain (30%) and Denmark (25%). 8% of the men in the bottom 20% were able to reach the top 20% while this rate was 12% in Britain and 14% in Denmark.

65% of those born in the bottom 20% stay within the bottom two-fifths. Of those born in the bottom 10%, 22% remain there. In Canada, the number is 16%.

The news is, as always, better at the top: about 62% of those raised in the top 20% remain in the top two-fifths. For those in the top 10%, 26% of American men born there stay there. Canada fares worse here: only 18% of Canadian men born into the top 10% remain there.

This mobility from income class to income class is called relative mobility. It is considered relative in that the movement is defined relative to the person’s class of origin. So, for example, a person being born in the bottom 10% but moving on up to the top 10% would be upward relative mobility.

Another type of mobility is called absolute mobility. This measure involves a comparison of incomes rather than economic class. Looked at in terms of absolute mobility Americans seem to be doing well: 81% of Americans have a higher income than their parents because the United States is richer now than it was then.

One of the main focuses of concern in recent years has been the core of the United States, the middle class. About 36% of Americans born in the middle 20% move up, about 23% stay there, and 41% move down. Looked at positively, about 58% of the middle class will do as well as or better (relatively speaking) than their parents. Looked at negatively, 64% of the middle class will do no better or will do worse than their parents. In any case, the largest percentage will do worse than their parents, relatively speaking.

As far as why the United States seems to be weak in regards to mobility (especially upwards mobility), this is a matter of considerable dispute which is often tainted with competing political ideologies.

One factor, pointed out by Rick Santorum, is that the poor in the United States are more likely to be raised by single mothers relative to other countries. This is taken by some to be a factor in the lower mobility and as something to be utilized as a premise in arguing in favor of the traditional family.

Another factor is that the United States leads the world in the percentage of its citizens who are in prison. As is obvious, being imprisoned is a major economic impediment that tends to endure throughout a person’s life. As such, the high incarceration rates (mostly resulting from the war on drugs) tend to reduce economic mobility by trapping people in poverty.

A third factor is the high economic inequality in the United States which means that the distance between economic classes is rather large. To use an analogy, the lowest economic class starts out at the base Mt. Everest while the top class begins at the summit. Working up from the bottom or even in the middle requires an incredible change in income and wealth.

A fourth factor is that the economic playing field is not level. Some people possess considerable advantages (such as starting wealth, family connections, political influence, and race). To use a sports analogy, moving up is rather like running a marathon in which some people start at various miles along the course, with the poorest starting at the very beginning and the rich starting miles closer to the end. Catching up to folks who have such a huge lead is not impossible, but clearly very difficult.

One of the key advantages is education. While people in the lower classes can attend college, this is obviously more difficult in terms of paying for college, being prepared for college (wealthy areas tend to have the best K-12 schools while poor areas have the worst), and having the connections needed to get into the better schools. The current trend is to cut education spending which will obviously hurt poorer families more than wealthy families and this will only serve to lower mobility.

A Fifth and very controversial factor is unionization or the lack thereof. While the narrative from the right is that unions are job killers and economy destroyers, lower rates of unionization tends to lead to lower wages and reduced benefits, thus reducing the ability of workers to work their way up. Interestingly, the lowering of wages is sometimes regarded as a good thing since it increases profits and it is claimed that this leads to more jobs. However, some see the creation of more lower paying jobs to be less than ideal.

A sixth factor and one that might seem odd is the obesity epidemic in the United States. While the exact impact of modern obesity will not be known for some time, it is known that being obese increases health care costs and generally has a negative impact on success. Some of this impact is due to the health impact of obesity which can cause a person to miss work and be less productive. Weirdly enough, the United States might be less mobile because it is getting too fat to move.

Naturally, none of the above addresses the ethics of the matter—that is a matter for another essay.

I’ve been involved in various informal discussions about the Occupy Wall Street movement and one point that I have heard raised on several occasions is that we need to have an economic system in which some people have far greater income and wealth than others. Folks often add that this also means that the government should not raise taxes on the wealthy. The gist of the reasoning seems to be that without the potential to make such money and acquire such wealth (and keep it), people will not have any motivation to work, create businesses, innovate, invent and so on.

As far as working goes, that is obviously not true. Most folks know that they have no chance of having CEO level income and wealth (or even above average income and wealth) and yet they work anyway. One excellent motivation is, of course, need. True, most folks would like to have such income and wealth, but that certainly is not their primary motivation to punch the clock. To ascribe that motivation to most folks would be to also ascribe to them a seemingly unrelenting self-deception or ignorance. In my own case, I know that I will never have vast wealth or income as a professor and yet I still continue to work. If it became a law that no one could have a personal income greater than $1 million per year (and no, I am not suggesting this), I’d still go to work. The odds are you would too. For the tiny percentage of folks who have a realistic shot at the CEO level of wealth and income, it could be reasonable to attribute to them this sort of motivation. But, they would certainly still work even if they knew that doing so would merely ensure that they could buy food and stuff.

Of course, the really wealthy do not become wealthy by punching a clock. They get that way via other means (and not just inheritance). They might create a business, invent, innovate or market some rare talent (such as acting, athletic, or singing prowess). So, one might argue, while a limit on mega-wealth might not cause people to stop working, it would surely stop people from creating businesses, innovating and so on.

However, this does not seem to be the case. After all, people invent and innovate for reasons other than money. To use the example of Steve Jobs, the folks who knew him well always claim that he was not in it for the money and the same is often said about other innovators. This does make sense-after all, they set out to innovate and it happened to make them wealthy. There are also many other examples, such as Tim Berners-Lee, of people who innovate for reasons other than becoming wealthy. As a final example, consider all the folks who develop open source software-they are clearly not doing that to become wealthy. As such, people would still create things like technology and software even if they could not, for some reason, become super wealthy doing so.

As far as creating and performing go, people obviously do those things even when they do not expect a huge financial reward. Most writers and artists do what they do for the love of what they do (or maybe out of vanity), rather than for the hope of being super wealthy. Athletes who know they will never be a Michael Jordan or Tiger Woods get out there and give it all-knowing they will never be in a commercial selling underwear or Gatorade. In my own case, I know that there is not much money to be made in running and I know that even if there was, I certainly would not be making it (I’m “all-conference” good, not “Olympic good”). Yet, I run six days a week and race as hard as I can. I know that there are thousands of people doing the same.

Now, it might be objected that people will not do these things without getting something out of it. In reply, my obvious answer is that I agree. No rational being would do something if it knew that doing so resulted in no value whatsoever. However, what counts as value is not limited merely to money. As I have argued above, people are clearly motivated by factors other than money and even when it comes to money the main motivation seems to be to have enough for a good life, rather than merely accumulating vast wealth for its own sake.

Obviously there are people who regard accumulating vast wealth as an important goal. There is, on the face of it, nothing inherently wrong with that goal or achieving it. However, when this accumulation comes at the expense of others and causes great harm (such as how some folks profited while the world economy was brought to its metaphorical knees), then there is a problem. I am fine with competition and reward based on merit. To use an obvious analogy, I think that the person who wins the race fairly and on her merits should get the biggest trophy. However, if the person “wins” via foul means and in doing so hurts the other runners, then they should be punished rather than receiving the biggest trophy. I also know that people will still do their best even when there is no trophy at all.

Developers are always striving to create that killer app. According to Representative Jesse Jackson, Jr. Apple’s iPad provides just such killer apps. Unfortunately, they are job killer apps, at least as he sees it. According to Jackson

“A few short weeks ago I came to the House floor after having purchased an iPad and said that I happened to believe, Mr. Speaker, that at some point in time this new device, which is now probably responsible for eliminating thousands of American jobs. Now Borders is closing stores because, why do you need to go to Borders anymore? Why do you need to go to Barnes & Noble? Buy an iPad and download your newspaper, download your book, download your magazine.”

Jackson is correct to point out that the way books, newspapers and magazines are sold has changed. As he points out, you do not need to go to a Borders or a Barnes & Noble to get these things. You can simply fire up your iPad. Of course, what he fails to mention is that you can also fire up your Kindle, your smart phone, your Mac, your PC, your Android tablet, your Barnes & Noble Nook or other device. As such, to lay the blame on the iPad is rather unfair. If the iPad is killing jobs, then it is not a lone killer, but part of an ever growing pack of killers.

There is, of course, the question of whether these devices are killing jobs.

In regards to Borders, it seems unfair to blame its demise solely on the iPad or other such devices. After all, Amazon has been selling physical books at a significant discount for some time, which certainly has had an impact on brick and mortar retailers such as Borders. It also seems reasonable to consider that Borders might also bear some blame in its demise in terms of its management and approach to changes in technology and consumer behavior.

These changes will (and have) resulted in job losses. After all, the digital market is expanding as the paper market is shrinking. Part of this shrinkage is due to factors other than the expansion of the digital market, but it is clearly a factor. Of course, the iPad and other devices are merely the latest news in a process that has been going on since the advent of the personal computer. Just as the telephone eliminated jobs (such as those in the telegram business), the iPad and its ilk will also help eliminate jobs. However, these devices also create jobs. After all, people have to make them, sell them, repair them, and so on. Also, people still have to create the content that is being sold on these devices, ranging from apps to books to movies. As such, while the growing digital economy is eliminating jobs in some areas, it is clearly creating jobs elsewhere.

Of course, there is still the legitimate question of whether or not the jobs being created are replacing the jobs lost to Americans. After all, the Borders jobs went mainly to Americans, while the iPads and their ilk are made in China and other places outside of the United States. While much of the content for these devices is created in the United States, there is also the question of whether or not these jobs offset the losses created by the shifting economy. This is, of course, an empirical matter.

As a final point, even if the iPad and its fellows are killing jobs by changing the nature of how content is sold and delivered, there is the question of what Congress should do about it, if anything. After all, such significant changes in technology (as noted above) always lead to changes in the way the economy works and trying to hold back these changes by law would most likely be a cure that is worse than the disease.